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Nine Family Members in Alabama Indicted for Tax Fraud and Identity Theft Conspiracy
Barbara Murry, Douglas Murry, Douglas Murry III, Yolanda Moses, Lee Moses, Veronica Temple, Jeffrey Temple, Almetta Johnson and Courtney Johnson were charged in an indictment by a federal grand jury in the Middle District of Alabama on a variety of counts stemming from an alleged identity theft and tax fraud scheme, according to the Justice Department and the Internal Revenue Service (IRS). The 33-count indictment charges all nine with conspiring to defraud the United States and to commit theft of public funds and with theft of public funds. Barbara Murry, Yolanda Moses and Veronica Temple are also charged with aggravated identity theft. The indictment was unsealed last Friday, May 4.
According to the indictment, all of the individuals are related to each other. Barbara Murry owned and operated B&B Weaving Shop, located in Montgomery, Alabama. B&B Weaving Shop was located in the same building as B&B Tax Service. Barbara Murry’s daughter, Yolanda Moses, owned and operated B&B Tax Service. Between 2006 and 2012, Barbara Murry, Yolanda Moses and Veronica Temple allegedly filed false federal income tax returns with stolen identities and had refunds directly deposited into the bank accounts of their family members and others. According to the government, the bank accounts received at least $1.3 million in false tax refunds.
The specific instances of conduct included in the indictment are limited to deposits made in late 2011, and a majority of the deposits are in the amount of $1,400. This seems to be an odd time of the year to receive tax refunds. Further, the indictment alleges that the conspiracy was ongoing since approximately 2006, yet the deposits all take place in 2011. An indictment does not have to provide specific details of the circumstances giving rise to the case, but an individual has the right to be put on fair notice of the charges against them. The government is either being overly inclusive in the indictment regarding the dates of the alleged conspiracy, or the indictment fails to include everything.
Unfortunately, the indictment does not discuss in detail the government’s theory of the case and fails to connect the dots between the allegations and counts contained therein. The indictment only gives a cursory overview of the alleged scheme but manages to accuse nine family members of conspiring to defraud the IRS by means of identity theft. As this case continues, it will be interesting to hear the government’s foundation for the alleged conspiracy of fraud and identity theft.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Nine Charged in Southern California for Alleged Multi-Million Dollar Mortgage Fraud Scheme
An indictment was unsealed Tuesday in the Southern District of California, charging a local real estate agent and eight others with multiple counts of conspiracy, wire fraud, money laundering and criminal forfeiture, for an alleged mortgage fraud scheme.
Eric Elegado, and eight other mortgage industry professionals, Charmagne Elegado, Theodore Cohen, Minh Nguyen, Regidor Pacal, Alexander V. Garcia, Roman Macabulos, Ramin Lotfi and Roderick Huerto, were allegedly involved in a scheme to defraud low-income immigrants in San Diego, California.
According to the indictment, Eric Elegado owned and operated real estate and mortgage brokerage businesses in San Deigo, and the other individuals were all employees. Allegedly, the individuals conspired together to obtain mortgage loans for unqualified buyers by falsifying and assisting others in falsifying the employment and salary information on the loan documents.
In this case, it is unclear whether the mortgage borrowers were aware of the allegedly falsified employment and income documents used to obtain these loans. As always, any person who willfully participates in a scheme to defraud has opened themselves up to a potential investigation and prosecution.
The documents would then be submitted to mortgage lenders. The mortgage lenders allegedly loaned more than $50 million dollars during the course of the scheme. According to the FBI press release, the mortgage companies, lending institutions, and financial institutions lost more than $15 million dollars.
Although the government’s focus has mostly been on large corporations involved in subprime mortgage lending, this does not mean that investigations of smaller companies and individuals has fallen to the wayside. Whether the case involves a financial institution or an individual, the U.S government has stepped up their investigative efforts to seek out those whom they believe are defrauding the system. One significant difference must be mentioned – corporations are punished by fines, such as the recent $26 billion dollar settlement between the big banks and the U.S. government for foreclosure abuses, whereas individuals must face potential prison time.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
New York Man Arrested for Alleged Identity Theft and Tax Fraud
Gary Rogers, of East Meadow, N.Y., was arrested on Monday after being charged with identity theft and tax fraud after allegedly filing more than 200 false tax returns with the Internal Revenue Service (IRS).
Rogers was named in a federal criminal complaint that alleged he used stolen identification information to make false claims against the U.S. government by filing false tax returns to obtain fraudulent refunds. According to the affidavit in support of the criminal complaint filed in U.S. District Court in Brooklyn, Rogers filed approximately 200 federal income tax returns from 2004 through 2010 using the identification information of others. The complaint alleges that Rogers sought approximately $4,393,356 in fraudulent refunds over the six year period. There is no indication how much Rogers may have actually received, or whose identities he allegedly used to obtain the funds.
In addition to the traditional IRS functions, the IRS also has a Criminal Investigations (CI) Unit. The CI Unit employees approximately 2,700 special agents whose sole purpose is to investigate tax fraud, money laundering, and Bank Secrecy Act violations. The investigations of money laundering and BSA violations tend to overlap with the Department of Justice (DOJ) and the Financial Crimes Enforcement Network (FinCEN); however, the CI Unit is the only federal department that investigates criminal violations of the tax code.
The CI Unit focuses on several areas of financial crimes, including bankruptcy fraud, corporate tax fraud, employment tax evasion, and other crimes as related to filing false tax returns. The U.S. government clearly has a heightened interest in the financial sector, particularly in this economic climate. It is important to remember that mistakes contained on a tax return are not necessarily criminal violations. The CI Unit is more concerned with willful, or intentional, violations of tax fraud and evasion.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Three Californians Indicted for Alleged Insurance Fraud
Three Southern California residents have been arrested on federal bribery and embezzlement charges related to a scheme that allegedly caused a California state agency to issue at least $187,513 in unemployment insurance benefits checks to dozens of people who were not eligible for the benefits, with cash kickbacks allegedly going to the organizers of the scheme.
A 31-count indictment returned by a federal grand jury on February 1, 2012, charges three individuals with conspiracy, bribery, embezzlement and obstruction of justice. The individuals were arrested by special agents of the U.S. Department of Labor. David Paul Holden, 30, of Corona, a former employee of the California Employment Development Department (EDD), and Patricia Cordova, 31, of Corona, were arrested February 1, 2012. Narciso “Tony” Rodriguez, 29, of Riverside, was arrested February 2, 2012. The three individuals were arraigned on the indictment in United States District Court in Santa Ana.
According to the indictment, in 2010 and 2011, Holden worked at the EDD office in Anaheim, where he processed unemployment insurance claims and had access to EDD’s electronic database for approving claims and making payments of unemployment insurance benefits. Allegedly, personally and through a network of recruiters, which included Cordova and Rodriguez, Holden approached more than 50 individuals who were not qualified to receive state unemployment benefits because they were already employed, had voluntarily quit their prior jobs, or had been terminated for other reasons, including misconduct. Holden and his recruiters persuaded those people to provide their social security numbers and other information so that Holden could arrange for them to receive unemployment checks. According to the indictment, EDD’s electronic database was manipulated to make it appear that those people were entitled to benefits and caused EDD to issue unemployment benefits checks to those persons.
The indictment is sealed in this case; however, according to the press release, the indictment alleges that the people who were not qualified to receive unemployment benefits from EDD illegally obtained $187,513, but investigators have determined that EDD paid more than $500,000 to unqualified beneficiaries. The press release also states that Holden and his co-defendants received $33,100 in kickbacks, but investigators have determined that the amount of kickbacks and unemployment benefits that went directly to the defendants is more than $85,000.
The question must be asked, if the investigators determined that EED paid more than $500,000 to unqualified beneficiaries, and the alleged conspirators received more than $85,000 in kickbacks, then why are the amounts much less in the indictment? Perhaps the investigators are merely basing such high numbers on their assumptions and do not have proof to substantiate these allegations. This is beneficial for those charged in the case because typically, the higher the loss involved, the steeper the penalty.
In addition to bribery and embezzlement, the indictment alleges that Holden and Cordova took various steps to conceal the scheme and discourage other participants from cooperating with investigators.
Another point the press release makes clear is that the three individuals charged are not the only ones under scrutiny in this case. If what the indictment alleges is true, then investigators believe there was a much larger network involved. There is no doubt that prosecutors will attempt to uncover additional names by offering plea deals to the individuals currently charged in exchange for a possible lesser sentence.
If they are convicted of all counts in which they are charged, Holden would face a statutory maximum sentence of 305 years in federal prison, Cordova could be sentenced to as much as 45 years in prison, and Rodriguez would face a statutory maximum sentence of 15 years in prison.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Justice Department Uses False Claims Act to Recover Millions in Medicare Fraud
Fourteen hospitals located in New York, Mississippi, North Carolina, Washington, Indiana, Missouri and Florida have agreed to pay the United States a total of more than $12 million to settle allegations that the health care facilities submitted false claims to Medicare, the Justice Department announced yesterday.
The settlements resolve allegations that these hospitals overcharged Medicare between 2000 and 2008 when performing kyphoplasty, a minimally-invasive procedure used to treat certain spinal fractures that often are due to osteoporosis. In many cases, the procedure can be performed safely as a less costly outpatient procedure, but the government contends that the hospitals performed the procedure on an inpatient basis in order to increase their Medicare billings.
The Justice Department has now reached settlements with more than 40 hospitals totaling over $39 million to resolve false claims allegations related to kyphoplasty claims submitted to Medicare. These settlements follow the government’s 2008 settlement with Medtronic Spine LLC, corporate successor to Kyphon Inc., which paid $75 million to settle allegations that the company defrauded Medicare by counseling hospital providers to perform kyphoplasty procedures as an inpatient procedure even though the minimally-invasive procedure should have been done in many cases on an outpatient basis.
All of the settling facilities were named as defendants in a qui tam, or whistleblower, lawsuit brought under the False Claims Act (FCA), which permits private citizens, known as “relators,” to bring lawsuits on behalf of the United States and receive a portion of the proceeds of any settlement or judgment awarded against a defendant. In effect, the FCA provides huge incentives to private citizens for bringing suits against corporations or persons filing false claims with the government. The private citizens filing FCA claims are typically former employees or insiders with knowledge of the alleged false claims practice.
Once an FCA claim is filed, the government is required to investigate the claim within 60 days. Following the investigation, the government has the option to intervene in the case or abstain. If the government intervenes, the relators are entitled to receive 15-20% of the ultimate judgment. If the government declines intervention, and the case proceeds, the relators are entitled to 25-30% of the judgment.
By intervening in an FCA suit, the Justice Department avoids the usual criminal processes for investigating and pursuing criminal charges against those allegedly engaged in fraud. Moreover, the government can ultimately go after a monetary judgment through settlement rather than criminal restitution or forfeiture. This may be more beneficial particularly in the context of corporations.
The lawsuit above was filed in 2008 in federal district court in Buffalo, New York, by Craig Patrick and Charles Bates. Patrick is a former reimbursement manager for Kyphon, and Bates was formerly a regional sales manager for Kyphon. The relators will receive a total of approximately $2.1 million from the settlements.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Former United Nations Employee Sentenced for Fraud
Jeffery K. Armstrong, 52, of South Riding, Va., was sentenced today to 18 months in prison for obtaining more than $100,000 in salary payments by fraudulently holding concurrent jobs at the United Nations (U.N.) and the National Labor Relations Board (NLRB). He was ordered to serve a three-year term of supervised release following his sentence and to pay $128,153 in restitution.
Armstrong was convicted by a federal jury on October 21, 2011, on nine counts of wire fraud. He was indicted on June 28, 2011, by a federal grand jury in the Eastern District of Virginia for his scheme to defraud the U.N., an international organization committed to humanitarian and peace-keeping efforts, and the NLRB, an independent agency of the U.S. government.
According to evidence presented in the trial, in March 2008, Armstrong took a leave of absence from his position as a supervisory security specialist with the Department of the Army to accept a full-time position at the U.N. As an assistant chief of the Security and Safety Service at the U.N., Armstrong was responsible for all physical security of U.N. facilities in New York City, among other functions. According to evidence at trial, Armstrong received an annual salary from the U.N. of approximately $160,000. In February 2009, after working at the U.N. for almost a year, Armstrong applied for a position as chief of the security branch within the Division of the Administration at the NLRB in Washington, D.C. In April of 2009, Armstrong became a full-time employee at the NLRB, with an annual salary of approximately $121,000.
From approximately April to September 2009, Armstrong was an employee of both the U.N. and the NLRB. Armstrong concealed his dual employment from both employers by, among other things, dissuading NLRB personnel from contacting his supervisor at the U.N., submitting incomplete or inaccurate employment forms to the NLRB, and causing to be mailed to the NLRB false correspondence suggesting that he no longer worked at the U.N. In addition, Armstrong submitted medical leave documentation to the U.N., indicating that he was unable to work and was undergoing medical treatment, despite his full-time employment at the NLRB. According to the evidence presented at trial, Armstrong failed to notify his superiors at both entities of his concurrent employment and received more than $100,000 in concurrent salary.
One underlying issue that seems to be overlooked is the fact that the employers in this case, the U.N. and the NLRB, may have been somewhat negligent in failing to follow up on the information Armstrong was providing to them. As a chief of the security branch at the NLRB, one would think that past employers, including the U.N., would have been contacted rather than relying on paperwork provided by the potential employee. Further, the U.N. also appears to be negligent in failing to confirm whether Armstrong’s medical leave was valid. If both employers had acted diligently, Armstrong would not have been able to hold concurrent employment. If this was a civil case, these issues would be a larger factor in the case. However, in a criminal trial, negligence by others is hardly relevant as to whether a crime was committed.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Six Charged with Scheme to Defraud IRS by Using Deceased Taxpayer Information
A 10-count indictment was unsealed Wednesday charging six people with various offenses related to a scheme to defraud the Internal Revenue Service (IRS) of at least $1.7 million in fraudulently obtained tax returns, often filed in the names of recently deceased taxpayers, according to Justice Department press release released Wednesday.
According to the indictment, between April 15, 2009, to at least August 2011, Muaad Salem, Fahim Sulieman, Hanan Widdi, Najeh Widdi, Hazem Woodi and Daxesj Patel and other unknown co-conspirators allegedly defrauded the United States by filing false and fraudulent tax returns, many in the names of recently deceased taxpayers, and directing refunds to controlled locations in the state of Florida.
The indictment further alleges that the U.S. Treasury checks generated by the false and fraudulent returns would then be sent by the U.S. mail to co-conspirators in Ohio who would sell and distribute the checks for negotiation at various businesses and banking institutions.
The six are also charged with three counts of mail fraud and two counts of aggravated identity theft. In addition to the other charges, Patel is separately charged with two counts of making a false claim against the United States and with making a false statement to law enforcement officials investigating the crimes.
This case contemplates a hybrid of alleged crimes centered around a financial scheme to defraud the IRS. Unknown to most taxpayers, the IRS has its own Criminal Investigation Unit responsible for investigating fraudulent tax crimes. The CI Unit is actually quite substantial, with twenty-six field offices and 2,800 special agents. Investigations are usually targeted at legal source tax crimes, illegal source financial crimes, and counter narcotics and terrorism crimes. The CI Unit works in conjunction with the Justice Department to bring criminal charges against a person or entity once the fraud is substantiated by documentary evidence, usually just by following the paper trail connected to the money.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Operation Crystal Ball: Fraud, Fortune Tellers, and Money Laundering
The United States Attorney’s Office of the Southern District of Florida announced that 10 defendants have been charged in an indictment unsealed today. The indictment, the result of “Operation Crystal Ball,” focused on a group of individuals claiming to be fortune tellers, psychic readers and spiritual advisers. In reality, however, these individuals defrauded more than a dozen victims out of more than $40 million.
The 61-count indictment charges the defendants with conspiracy to commit mail and wire fraud, 11 counts of mail fraud, 48 counts of wire fraud, and one count of money laundering. Each count carries a statutory maximum of 20 years in prison, if convicted. In addition, the defendants will have to pay mandatory restitution to the victims of their crimes.
At first blush it would seem that the U.S. Attorney’s Office indicted these fortune tellers and psychics for being, well, fortune tellers and pyschics. Last I checked, our society had yet to make it criminal to market one’s self as “connected” to the spirit world and charge a fee to clients who want “access” to that world. Call it fortune telling, spiritual assistance, or religion, we haven’t yet deemed such practices as fraud. But upon closer inspection something more sinister was afoot than merely promising people their lives would improve by spiritual means.
On multiple occasions the defendants in this case would induce their clients “to give them large sums of money and other valuables. . . ‘temporarily’ . . . so [that] they could cleanse the money of curse[s] or evil spirits, with the promise of returning the money.” The defendants would represent to their clients that this money “was a sacrifice, not a payment.” That because money “was the root of all evil” it needed to be “set aside and prayed upon.” However the defendants never returned any of the money, even when asked by their clients.
So you see, the fraud (or false pretense) is not in the promise of “relieving [clients] of all evil spirits, the end of bad luck, and the end of curses.” The fraud is that these clients were induced to give the defendants money for purposes it wasn’t actually used for (no matter how ridiculous you may think that purpose is), namely that the money would be “set aside and prayed upon” and ultimately returned to the client.
There was no crime until it became apparent that the defendants were not interested in giving the money back to clients when requested. Instead, the “sacrifice, not payment” money was laundered through various bank accounts and businesses to give it the appearance of clean money, earned by the defendants and their co-conspirators. This extra step of laundering the money demonstrates the fraudulent intent of the defendants. According to the indictment the money was then used to buy homes, luxury cars, and motorcycles to the tune of nearly $40,000,000, further demonstrating their true intent to defraud their clients.
Had the defendants not actually spent the money but instead “set aside” the money, even in interest bearing accounts, where it was “prayed upon,” would have called into question whether a cognizable crime had even occurred. Since there is no verifiable means of proving or disproving the spiritual work performed by fortune tellers, and the fact that such spiritual marketing is not yet a criminal endeavor, the defendants might have been able to fight these charges effectively. But instead the defendants devised a scheme for obtaining money by means of false pretenses, representations, or promises, namely that they should be entrusted with large sums of money that would be available and eventually returned to their clients.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
